In China, the biggest market for many of the world’s smart devices, the global chip shortage has for months been a “chip famine”. During the onset of Covid-19 a year ago, Chinese parents with homeschooled children bought up tablets and laptops, causing long waits. Then, as the rest of the world followed suit and factory problems bit, chip demand started far outweighing supply.
As a result, there have been shortages of electric vehicles, washing machines and even toasters. There’s bad news for international travellers waiting out Beijing’s 21-day quarantine regime too: Nintendo says its Switch gaming consoles could be affected.
The founder of Xiaomi, the country’s biggest maker of smart home appliances, warned that consumers could be facing higher prices for electronics for as long as two years.
Consumers should, therefore, be relieved that the world’s leading chipmaker, Taiwan’s TSMC, announced plans last month to expand its production in Nanjing, China, of 28-nanometre chips — the kind that’s in short supply. The new lines could take a year to bear fruit and the demand for smart devices using those chips is only going up.
Technology has become a politically sensitive area in China, not least as the country realises that its chip industry needs to develop independent — “de-Americanised”, or “de-A” — supply chains in the wake of US sanctions. One naysayer has taken the spotlight in this debate: a nationalist tech analyst with a million Weibo followers and a controversial theory.
“The chip shortage is a false proposition,” wrote Xiang Ligang, saying that TSMC was using it as an excuse to expand in the mainland and “suck the blood of Chinese firms”. (China claims Taiwan as part of its territory and threatens to attack it if Taipei refuses to submit indefinitely.)
Xiang’s is a classic “infant industry” argument: China needs to develop domestic chipmaking champions. But when experienced foreign foundries such as TSMC expand in China, they’re using Chinese land and labour to outcompete domestic companies that need a chance to develop.
The premise that China needs better domestic chipmakers is now widely accepted here. And it is true that the US chokehold on chips has given Chinese people reason to complain that the world’s superpower is out to keep their tech sector down.
Chips have become a flashpoint for inciting nationalism, and nationalism travels well on Chinese social media. But unlike commentators such as Xiang, China’s chip-industry engineers advocate interconnection, not isolation, as a means of achieving independence.
Chinese companies are still far from producing 28nm chips on the same scale as TSMC. As a result, engineers at China’s chip foundries generally see its expansion as ultimately a benefit, rather than direct competition.
One mentioned the importance of learning from TSMC. He often came across its staff in industrial exchanges and conferences, where they would share knowhow about mature technologies that are no longer commercially important for TSMC but are of great use to Chinese newcomers.
Another cited the importance of having high-quality competitors to spur them to do better. And, of course, the best chip engineers hop around: TSMC trained several of China’s top chip executives. Overall, China’s chip engineers call for co-operation with non-American companies in order to progress towards a de-Americanised industry. No wonder the local government of Nanjing put in a lot of effort to help the expansion, say engineers.
Although state media outlet Xinhua has published an editorial rebutting Xiang’s statements, chip engineers worry that nationalistic voices will hurt the industry by cutting off global ties.
But since the imposition of US sanctions on Huawei two years ago, they have come to agree on at least one issue: while they may not believe that isolation is the means of achieving it, a previously internationally minded generation of engineers has converged on the goal of de-Americanisation.
The chip industry is globalised, which means it is impossible nowadays for any country to go it alone. Take Qualcomm: the US chip giant licensed its knowhow so that Chinese start-ups such as Xiaomi, Oppo and Vivo could make smartphones, which would have been extremely costly to create from scratch.
As a result, those brands put internet access in the hands of millions who would not otherwise have afforded it. While we wait for our devices to arrive, it may be worth reflecting on how we came to have them in the first place.
Yuan Yang is the FT’s deputy Beijing bureau chief
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